UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM
10-Q xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For
the quarterly period endedApril 1, 2001OR  ̈TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934   Commission file number 001-16047Advanced Power Technology, Inc.(Exact name of registrant as specified in
  its charter)
  Delaware
  93-0875072(State or other Jurisdiction of
  (I.R.S. EmployerIncorporation or Organization)
  Identification Number)
  405 SW Columbia Street, Bend, Oregon  97702(Address of principal executive offices and
  Zip Code)
  (541) 382-8028(Registrant's telephone number)
  Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.  YesxNo ̈ The
number of shares of the Registrant's Common Stock outstanding as of May 9, 2001
was 8,603,775 shares.   ADVANCED POWER TECHNOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS



Part
  I
  Financial
  InformationItem
  1.
  Financial
  Statements:Consolidated Balance Sheets
  as of March 31, 2001 and December 31, 2000Consolidated Statements of Operations for
  the three months ended March 31, 2001 and 2000Consolidated
  Statements of Cash Flows for the three months ended March 31, 2001 and 2000Notes to
  Consolidated Financial StatementsItem
  2.
  Managements
  Discussion and Analysis of Financial Condition and Results of OperationsItem
  3.
  Quantitative
  and Qualitative Disclosure About Market RiskPart
  II
  Other
  InformationItem
  6.
  Exhibits and Reports
  on Form 8-KSignatureADVANCED POWER TECHNOLOGY, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)

March 31,
  December 31,2001
  2000Assets
  (Unaudited)Current assets:Cash and
  cash equivalents
  $23,721
  $25,326Short-term
  investments
  8,119
  8,118Accounts
  receivable, net of allowance of $139 (2001) and $120 (2000)
  8,090
  6,776Inventories,
  net
  7,515
  6,814Prepaid
  expenses and other current assets
  1,906
  1,799Total current
  assets
  49,351
  48,833Property and equipment, net of accumulated amortization
  and depreciation of $8,040 (2001) and $8,273 (2000)
  4,786
  4,367Long-term investments
  4,077
  3,022Other assets
  1,209
  1,091Total assets
  $59,423
  $57,313Liabilities and Stockholders' EquityCurrent
  liabilities:Accounts
  payable
  $3,579
  $4,385Accrued
  expenses
  2,248
  1,402Current
  portion of long-term debt
  -
  21Current
  portion of capital lease obligations
  71
  80Total current
  liabilities
  5,898
  5,888Capital lease
  obligations, less current portion
  113
  130Deferred gain
  on sale leaseback
  175
  177Total
  liabilities
  6,186
  6,195Stockholders'
  equity:Preferred
  stock, par value $.001, 1,000,000 shares authorized; no shares issued and
  outstandingCommon
  stock, par value $.01, 19,000,000 shares authorized; 8,699,962 issued and
  8,591,105 shares outstanding in 2001; 8,515,818 shares issued and 8,406,961
  shares outstanding in 2000
  87
  85Additional
  paid-in capital
  67,100
  66,826Treasury
  stock, at cost, 108,857 shares
  (1,700)
  (1,700)Deferred
  stock compensation
  (289)
  (330)Accumulated
  other comprehensive income
  84
  64Accumulated
  deficit
  (12,045)
  (13,827)Total
  stockholders' equity
  53,237
  51,118$59,423
  $57,313See
accompanying notes to consolidated financial statements.

ADVANCED
POWER TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF
OPERATIONS
 (In thousands, except per share
amounts)
(Unaudited)

Three Months Ended March 31,2001
  2000Revenues, net
  $13,158
  $9,561Cost of goods
  sold
  7,944
  6,178Gross profit
  5,214
  3,383Operating
  expenses:Research and
  development
  351
  243Selling,
  general and administrative
  2,726
  2,289Total
  operating expenses
  3,077
  2,532Income from
  operations
  2,137
  851Other income
  (expense), net
  604
  (259)Income before
  income tax expense
  2,741
  592Income tax
  expense
  959
  348Net income
  $1,782
  $244Net income per share:Basic
  $0.21
  $0.05Diluted
  0.19
  0.04Weighted
  average number of shares used in the computation of net income per share:Basic
  8,452
  5,000Diluted
  9,300
  6,224See accompanying notes
to consolidated financial statements.

ADVANCED
POWER TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands)
(Unaudited)

Three Months Ended March 31,2001
  2000Cash flows from
  operating activities:Net income
  $1,782
  $244Adjustments
  to reconcile net income to net cash (used in) provided by operating
  activities:Depreciation and amortization
  258
  343Deferred gain on sale-leaseback
  (4)
  (8)Amortization of deferred stock compensation
  41
  73Changes in
  operating assets and liabilities:Accounts receivable
  (1,424)
  (1,138)Inventories
  (756)
  (461)Prepaid
  expenses and other assets
  (251)
  61Accounts payable and accrued expenses
  172
  1,895Net cash
  (used in) provided by operating activities
  (182)
  1,009Cash flows from
  investing activities:Purchases
  of long-term investments
  (2,002)
  -Proceeds
  from sale of long-term investments
  1,000
  -Purchase of
  property and equipment
  (677)
  (1,039)Net cash
  used in investing activities
  (1,679)
  (1,039)Cash flows from
  financing activities:Payments on
  lines of credit, net
  -
  (745)Payments on
  capital lease obligations
  (26)
  (66)Proceeds
  from issuance of long-term debt
  -
  775Principal
  payments on long-term debt
  (20)
  (67)Proceeds
  from exercise of stock options
  276
  -Net cash
  provided by (used in) financing activities
  230
  (103)Effects of
  exchange rate changes on cash
  26
  (6)Net change
  in cash and cash equivalents
  (1,605)
  (139)Cash and cash
  equivalents at beginning of period
  25,326
  316Cash and cash
  equivalents at end of period
  $23,721
  $177Supplemental
  disclosure of cash flow information:Cash paid
  during the period for:   Interest
  $18
  $134Income taxes
  -
  217Supplemental
  disclosure of noncash activities:Unrealized
  gain on short-term and long-term investments
  $53
  $-See
accompanying notes to consolidated financial statements.

ADVANCED POWER TECHNOLOGY, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars in thousands)

Note 1. BASIS OF PRESENTATION

The
accompanying unaudited consolidated financial statements include normal
recurring adjustments necessary for a fair presentation of Advanced Power
Technology, Inc.s (APT) interim results. 
The consolidated financial statements and notes in this Form 10-Q are
presented as permitted by Regulation S-X, and as such, they do not contain
certain information included in APTs 2000 annual consolidated financial
statements and notes.  This Form 10-Q
should be read in conjunction with APTs consolidated financial statements and
notes included in its Annual Report on Form 10-K for the year ended December
31, 2000.  The financial information as
of December 31, 2000 is derived from the audited consolidated financial
statements as filed with APTs Annual Report on Form 10-K for the year ended
December 31, 2000.  The results of
operations for the three months ended March 31, 2001 are not necessarily
indicative of the results expected for the entire fiscal year ending December
31, 2001.

APTs
financial quarters are 13 week periods. The first quarter of 2001 ended on
April 1 and the first quarter of 2000 ended on April 2.  For convenience, the first quarters of 2001
and 2000 are shown as ended on March 31.

Note 2. COMPREHENSIVE INCOME

APT
has adopted Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130), which requires the reporting of all changes
in equity that result from transactions and economic events other than
transactions with owners. Comprehensive income is the total of net income and
all other non-owner changes in equity. Comprehensive income includes foreign
currency translations and unrealized gains and losses from investments, which
were not material in the periods presented.

Note 3. INVENTORIES, NET

March
  31, 2001
  December
  31, 2000(unaudited)Raw materials
  $1,092
  $1,205Work in process
  4,575
  4,114Finished goods
  2,487
  2,1708,154
  7,489Valuation reserve
  (639)
  (675)$7,515
  $6,814Note 4. NET INCOME PER SHARE

Basic
net income per share is computed using the weighted average number of shares of
common stock outstanding for the period. Diluted net income per share is
computed using the weighted average number of shares of common stock and
dilutive potential common shares related to stock options and warrants
outstanding during the period. Incremental shares related to outstanding stock
options and warrants of approximately 848,000 for the three months ended March
31, 2001 and 1,244,000 for the three months ended March 31, 2000 were included
in the calculations of diluted net income per share for those periods.

ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This
discussion and analysis is designed to be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth in our Annual Report on Form 10-K for the year ended December 31, 2000.

Forward-looking Statements and Risk Factors Affecting
Business and Results of Operations

All
statements and trend analyses contained in this item and elsewhere in this
report on Form 10-Q relative to the future constitute
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-statements are subject to the
business and economic risks faced by us and our actual results of operations
may differ materially from those contained in the forward-looking statements. In
addition, results of operations for the periods discussed below should not be
considered indicative of the results to be expected in any future period and
fluctuations in operating results may result in fluctuations in the market
price of our common stock. Our quarterly and annual operating results may vary
significantly depending on many factors, including but not limited to, the
ability of subcontractors to meet their delivery commitments; unfavorable
changes in industry and competitive conditions; our mix of product shipments;
the accuracy of our customers forecasts; the effectiveness of our efforts to
control and reduce costs; and other risks detailed in "Managements
Discussion and Analysis of Financial Condition and Results of Operations - Risk
Factors Affecting Business and Results of Operations" in our Annual Report
on Form 10-K for the year ended December 31, 2000, filed with the Securities
and Exchange Commission.

Overview

We are
a leading designer, manufacturer and marketer of high-performance power
semiconductors. Power semiconductors manage and regulate power by converting
electricity into a form required by electrical and electronic products. Our
power semiconductors increase system efficiency, permit the design of more
compact end products and improve features and functionality. We are primarily
focused on the high power, high frequency segment of the power semiconductor
market. High power refers to the ability to handle voltages and currents above
one kilowatt, and high frequency refers to the ability to switch on and off at
speeds above 100 kilohertz. We sell our products primarily in North America and
Europe, with increasing sales in Asia, through a network of independent sales
representatives and distributors.

In
August 2000, we completed an initial public offering, or IPO, of 4,025,000
shares of our common stock, including the underwriters over-allotment, at an
offering price of $15.00 per share. The IPO included 2,830,000 shares sold by
APT and 1,195,000 shares sold by shareholders of APT, and resulted in net
proceeds to APT of approximately $38.3 million.

Results of
Operations

The
following table presents our consolidated statement of operations data for the
periods indicated as a percentage of net revenue:

Three Months Ended March 31,2001
  2000Revenues, net
  100.0%
  100.0%Cost of goods
  sold
  60.4
  64.6Gross profit
  39.6
  35.4Operating
  expenses:Research and
  development
  2.7
  2.6Selling,
  general and administrative
  20.7
  23.9Total
  operating expenses
  23.4
  26.5Income from
  operations
  16.2
  8.9Other income
  (expense), net
  4.6
  (2.7)Income before
  income tax expense
  20.8
  6.2Income tax
  expense
  7.3
  3.6Net income
  13.5%
  2.6%Revenues.  Our net revenues were $13.2 million in
the first quarter of 2001, an increase of 37.6% from net revenues of
$9.6 million in the first quarter of 2000. The increase in net revenues in
the first quarter of 2001, as compared to the first quarter of 2000, resulted
from the continued increase of sales of our products in the communications and
Internet infrastructure markets, and increased sales of our products in the
semiconductor capital equipment market. However, during the first quarter of
2001, we began to see weakening demand from certain customers in the communications
and Internet infrastructure markets. Additionally, recent substantial slowing
of worldwide semiconductor sales has resulted in a decline in demand for
semiconductor capital equipment, which is expected to decrease our sales in
this sector. The weakness in both of these industry segments will result in
lower revenues and profits in the second quarter of 2001.We have limited
visibility as to the duration of this slowing.

During
2000, we entered into a joint venture agreement in China, which included a
license and technology transfer agreement for certain of our technologies, in
exchange for cash payments totaling $1.5 million over two to three years. The
$1.5 million is being recognized as revenue as specific milestones under the
contract for the implementation of the technology transferred to the joint
venture are met. An immaterial amount of technology license revenue was
included in revenues for the first quarters of 2001 and 2000.

Gross
Profit.  Our gross profit
margin was 39.6% in the first quarter of 2001 compared to 35.4% in the first
quarter of 2000. The increase in gross profit margin in the first quarter of
2001, as compared to the first quarter of 2000, resulted from lower costs
associated with use of processed silicon wafers, a more favorable product mix
including greater sales of radio frequency, or RF, power semiconductors which
have a higher gross margin and improved capacity utilization in our Bend,
Oregon manufacturing facility. Our gross profit is expected to decline in the
second quarter of 2001 due to a less favorable product mix expected in that
quarter.

Research and
Development Expense.  Our
research and development expenses were $351,000 in the first quarter of 2001,
an increase of 44.4% from research and development expenses of $243,000 in the
first quarter of 2001. The increase in research and development expenses in the
first quarter of 2001, as compared to the first quarter of 2000, primarily
resulted from increased use of materials associated with our research and
development efforts. We expect that our research and development efforts will
continue to increase in 2001. As a percent of net revenues, research and
development expense increased to 2.7% in first quarter of 2001 from 2.6% in the
first quarter of 2000.





Selling, General
and Administrative Expense. 
Our selling, general and administrative expenses were $2.7 million
in the first quarter of 2001, an increase of 19.0% from selling, general and
administrative expenses of $2.3 million in the first quarter of 2000. The
increase in selling, general and administrative expenses in the first quarter
of 2001, as compared to the first quarter of 2000, principally resulted from
$300,000 of increased payroll from bonuses based on operating results and
additional personnel; $68,000 of increased commissions on higher revenues; and
$100,000 of expenses related to the growth of our business and being a public
company, including board of director fees and increased fees from accounting,
legal and other outside services.  These
increases were offset by the decrease in goodwill amortization to $0 in the
first quarter of 2001, from $96,000 in the first quarter of 2000. (See
"Effects of Push Down Accounting" below.)

As a
percent of net revenues, selling, general and administrative expense decreased
to 20.7% in the first quarter of 2001 from 23.9% in the first quarter of 2000,
primarily due to the increase in net revenues.

Stock
Compensation Expense.  Stock
compensation expense includes costs relating to stock-based employee
compensation arrangements, and is based on the difference between the fair
market value of our common stock on the date of grant of options and the
exercise price of options to purchase that stock. Stock compensation expense is
recognized over the vesting periods of the related options, typically five
years. Stock compensation expense of $41,000 was recorded in the first quarter
of 2001. Of this amount, $13,500 was recorded in cost of goods sold, $5,000 was
recorded in research and development expense and $22,500 was recorded in
selling, general and administrative expense. Stock compensation expense of
$72,000 was recorded in the first quarter of 2000. Of this amount, $25,000 was
recorded in cost of goods sold, $8,000 was recorded in research and development
expense and $39,000 was recorded in selling, general and administrative
expense. We expect to record stock compensation expense of $41,000 in the
second quarter of 2001.

Other income (expense), net. Other income
(expense), net, which includes interest expense, interest income and other
expense, was $604,000 in the first quarter of 2001 and $(259,000) in the first
quarter of 2000.  Included in other
income (expense) in the first quarter of 2001 was $523,000 of interest income
primarily earned on the investment of proceeds from our IPO in August 2000,
compared to $0 interest income in the first quarter of 2000. Included in other
income (expenses) in the first quarter of 2000 was $267,000 of interest expense
principally composed of imputed interest related to the issuance of warrants to
Advanced Energy Industries, Inc, interest expense related to the
$3.3 million note payable to Hamilton Sundstrand for the purchase of APT
by our six senior officers (see "Effects of Push Down Accounting below)
and other outstanding debt related to our operations, compared to an immaterial
amount of interest in the first quarter of 2001.

Income
Tax Expense.  Our effective tax rate was approximately 35%
in the first quarter of 2001. We expect our annual effective tax rate will
approximate 35% for 2001.  The effective
tax rate in the first quarter of 2000 was approximately 59%. The effective tax
rate in the first quarter of 2000 was increased by permanent differences such
as nondeductible expenses and was decreased by the benefit of a decrease in the
valuation allowance on the foreign net operating losses. Interest on a $3.3
million note payable to Hamilton Sundstrand was not deductible for tax purposes
by us, and interest income was recognized for tax purposes on $3.1 million
notes payable from our six senior officers, but not recorded on our
consolidated financial statements. 
Additionally, goodwill amortization related to the purchase transactions
increased the effective tax rate because the amortization was not deductible
for tax purposes. See "Effects of Push
Down Accounting below.

Effects of
Push Down Accounting

In
September 1995, our six senior officers purchased a controlling 51%
interest in APT for approximately $3.6 million, of which approximately
$3.3 million was funded with a note payable to Hamilton Sundstrand, the
seller, and the balance was funded from the personal assets of these officers.
In January 1998, these same officers purchased the remaining interest in
APT for approximately $2.5 million. We loaned our six senior officers $3.0 million,
an amount sufficient to purchase the remaining 49% interest and to pay interest
on the note owed to Hamilton Sundstrand. In addition, we loaned $100,000 to our
six senior officers in 1999 to pay interest on the Hamilton Sundstrand note. In
accordance with purchase accounting and push down accounting rules, we were
required to establish a new cost basis for our assets and liabilities in
January 1998, based on these purchase transactions and to reflect that basis in
our consolidated financial statements. The effects of applying push down
accounting to our accompanying consolidated financial statements were as
follows:

            In
1998, we recorded the $3.3 million note payable to Hamilton Sundstrand
related to the 1995 purchase as long-term debt on our consolidated balance
sheet and we have included corresponding interest expense in our consolidated
statements of operations. In August 2000, our six senior officers used a
portion of their proceeds from the sale of shares of common stock in our IPO to
repay the $3.3 million note payable and accrued interest of $771,000 to
Hamilton Sundstrand, which eliminates our interest expense related to this debt
going forward.            The
$3.1 million in notes payable to APT and accrued interest related to the
1998 purchase was not recorded as a liability on our consolidated balance
sheet, but was reflected as a reduction to stockholders' equity.  In August 2000, our six senior officers used
a portion of their proceeds from the sale of shares of common stock in our IPO
to repay the $3.1 million notes payable and accrued interest of $481,000 to
APT, which increased our stockholders' equity.We
accounted for the purchase of APT by our six senior officers using the purchase
method of accounting, which required that the purchase price be allocated to
the net assets acquired based on the relative fair value of assets acquired.
The amount of the purchase price in excess of the fair value of the net assets
acquired was classified as goodwill. We recorded approximately $983,000 of goodwill
related to the purchase transactions. Goodwill amortization is included in
selling, general and administrative expense in our consolidated statements of
operations. As of September 30, 2000, goodwill associated with the
purchase transactions was fully amortized.Liquidity
and Capital Resources

In
the first quarter of 2001, we used approximately $182,000 in operating
activities, primarily from net income of $1.8 million adjusted for depreciation
and amortization of $258,000, offset by an increase in accounts receivable
of  $1.4 million and an increase in
inventories of $756,000. Accounts receivable and inventories increased as a
result of increased sales in the first quarter of 2001.

In the
first quarter of 2001, we used approximately $1.7 million in investing
activities, which consisted of the purchase of $2.0 million of long-term
investments and the purchase of $677,000 of equipment, offset by proceeds from
the sale of long-term investments of $1.0 million. At March 31, 2001 we had
capital expenditure commitments of approximately $533,000.

In
the first quarter of 2001, we generated approximately $230,000 in financing
activities, which primarily consisted of net proceeds of $276,000 from the
exercise of stock options.

We
have two lines of credit with a bank for up to a total of $6.0 million to
provide funds for our continuing operations. No amounts were outstanding under
the lines of credit at March 31, 2001. The lines of credit expire in
May 2001, bear interest at prime plus 1.0% or 1.25% based on the ratio of
debt to equity and are secured by accounts receivable and inventories.
Borrowings under our lines of credit are subject to financial covenants,
including minimum tangible net worth, maximum debt to tangible net worth,
minimum debt service ratio and quick ratio. We were in compliance with all
covenants as of March 31, 2001. We are currently renegotiating our lines of
credit.

We
believe our existing cash and cash equivalents, expected cash flow from
operations and other existing financing sources will be sufficient to support
our operating cash requirements for at least the next 12 months. We expect
from time to time to evaluate potential acquisitions and equity investments
complementary to our market strategy. To the extent we pursue such transactions,
we could require additional equity or debt financing to fund such activities or
to fund our working capital requirements in the event of an industry downturn
or an unexpected adverse change in our business operations. To the extent we
require additional capital, we cannot assure you that we will be able to obtain
such financing on terms favorable to us, or at all.

Quantitative
and Qualitative Disclosure About Market Risk

We
do not use derivative financial instruments in our investment portfolio. Due to
the short duration and conservative nature of our cash equivalents, and the
high quality and conservative nature of our long-term investments, we do not
expect any material loss with respect to our investment portfolio.

Currently
less than 3% of our sales are transacted in local currencies, primarily French
francs. As a result, our international results of operations are subject to
foreign exchange rate fluctuations. We do not currently hedge against foreign
currency rate fluctuations. Most of our export sales and sales by APT Europe
are in U.S. dollars, and most of our foreign currency sales are from
operations with significant expenses in the same currency. As a result, gains
and losses from such fluctuations have not been material to our consolidated
results of operations.

PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The exhibits filed
as part of this report are listed below:

Exhibit
  No.+10.19
  Agreement for Wafer
  Production and Testing between Advanced Power Technology, Inc. and Epsil
  Technologies, Inc.+ Confidential treatment has been
requested with respect to certain portions of this agreement. The omitted
portions have been filed separately with the Securities and Exchange
Commission.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter
ended March 31, 2001.

SIGNATURE

Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized this 14th day of May, 2001.

ADVANCED
  POWER TECHNOLOGY, INC.By:/s/
  GREG M. HAUGENGreg
  M. HaugenVice
  President, Finance and Administration,Chief Financial Officer and Secretary(Principal
  Financial Officer)